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The American Middle Class: Undermined, Underpaid and Underemployed

October 29, 2011

By Fred Siegel

A QUESTION for historians in the not-too-distant future.

Forty years from now, politicians, writers and historians may struggle to understand how the US, once the quintessential middle-class society, became as socially stratified as Europe or even Brazil.

Should that dark scenario come to pass, they would do well to turn their attention first to New York City and New York State, which have been in the vanguard of middle-class decline.

It was in mid-1960s New York - under the leadership of a Barack Obama precursor, Hollywood-handsome mayor John Lindsay - that the country’s first top-bottom political coalition emerged. In 1965, Gotham had more manufacturing jobs than any other city in the country, but as the city’s political elites expanded, social programs to help African-Americans and Puerto Ricans inflated the unionised public-sector workforce to incorporate minority workers; then taxes went up and up to pay for the spending, joining global competition and higher crime to produce a massive exodus of manufacturing and middle-class jobs.

In the past 45 years, New York has led the country in outmigration. A study by EJ McMahon and Robert Scardamalia of the Manhattan Institute’s Empire Centre for New York State Policy notes that since 1960, New York has lost 7.3 million residents to the rest of the country. For the past 20 years, “New York’s net population loss due to domestic migration has been the highest of any state as a percentage of population”.

New York City has solidified its standing as the most unequal city in the US. Twenty-five per cent of New York was middle-class in 1970, according to a Brookings Institution study. By 2008, that figure had dropped to 16 per cent, and the numbers have only plunged further since the financial crisis, with virtually all the new jobs in the city’s hourglass economy coming at either the high end or the low. Only high-end businesses can succeed in a local economy that has the nation’s highest taxes and highest cost of living - and even those businesses, in many cases, weathered the downturn only by living off the Fed’s policy of subsidising banks. Despite the federal largesse, more of the city’s new jobs are in the low-wage hospitality and food-services industries than in the financial sector.

The middle class has lost its political voice in a city dominated by the politically wired wealthy and the public-sector unions that service the poor.

New York is the picture of what the Tea Party fears for the country at large. In the 1970s, liberal mandarins seized the high ground of US institutions in the name of managing social, racial, gender, and environmental justice on behalf of the disadvantaged. Their job, as they saw it, was to protect minorities from the depredations of middle-class mores. Then, in the wake of the Aquarian age, the US developed the first mass upper-middle class in the history of the world. These well-to-do, often politically connected professionals - including the increasingly intertwined wealthy of Wall Street, Hollywood, and Silicon Valley - espoused what might be called gentry liberalism, a creed according to which the middle classes had to be punished for their racism, sexism and excess consumption.

And they have been punished - with job losses. These losses are the inevitable result of the costs of an ever-expanding, European-style public sector; environmental restrictions on manufacturing, mining, and forestry, which push high-paying jobs offshore; and illegal immigration, which reduces overall wage levels.

At the same time, the decline in the quality of schools has undermined what was once a ladder of economic ascent. After completing high school today, students are likely to require a raft of remedial courses in college. Then, after college, many middle-class students graduate not with an education but with a credential - and obligations on enormous loans that paid for the intermittent attention of a highly paid, tenured faculty.

The private-sector middle class’s plight has been exacerbated by international competition and technological innovation, which have undermined job security, including for unionised manufacturing workers, who had enjoyed an unprecedented prosperity for about a quarter-century.

Median household incomes have grown only marginally since the early 70s, despite the mass movement of women into the workplace. Many dual-earner families have been caught in the two-income tax trap: on the one hand, they pay for services once performed by the homemaker; on the other, notes economist Todd Zywicki, they’re pushed into a higher tax bracket when the wife’s salary is added to the husband’s.

Adding to the woes of the middle and lower classes is that their families are far less stable than they were a generation ago. The decline of marriage has been driven not only by changing mores but also by a decline in male employment. In 1970, only one of 14 working-age men was out of the workforce. Today, notes Fortune’s Nina Easton, one in five is either “collecting unemployment, in prison, on disability, operating in the underground economy or getting by on the pay cheques of wives, girlfriends or parents”. Today, four in 10 American babies are born out of wedlock.

During the current downturn, the black and Hispanic middle class has been particularly hard hit. From 2005 to 2009, according to a recent Pew survey, inflation-adjusted wealth fell by 66 per cent among Hispanic households and by 53 per cent among black households, compared with 16 per cent among white households.

These families worry, with good reason, that in the face of continuing high unemployment, they may fall out of the middle class. For the Obama administration and the public-sector unions, the solution to this slide is to force the nearly one in four employers that have contracts with the federal government to pay above-market wages.

Here again, New York has been a pacesetter. Recently, public-sector unions and their allies tried to force a developer rebuilding a decayed Bronx armoury to follow their wage and hiring guidelines; the deal collapsed, leaving one of the poorest sections of Gotham in the lurch.

There’s a major difference, though, between New York and the country as a whole. The New York option - move somewhere else - doesn’t apply to private-sector, middle-class workers fighting adverse conditions that exist throughout the US. So they’ve exercised the democratic right of political action, organising themselves to compete in elections.

The Tea Party is the national voice of the private-sector middle class - despite the demonisations heaped on it by public policy elites, whose own judgment and competence leave much to be desired.

The issue of middle-class decline should be front and centre next year, which is shaping up as a firestorm of an election. It’s likely to be a bitter contest between the polarised class interests of those who identify with the growth of government, and those who are being undermined by its expansion. Liberals will blame Tea Party “terrorists” for the tragedy of a fading middle class. They will continue to delude themselves into thinking, as Al Gore said in 2000, that their rivals represent “the powerful” and that they themselves act on behalf of “the people”- even though Barack Obama’s policies have poured money into Wall Street and the politically connected “green” businesses that form the upper half of his top-bottom electoral coalition.

The question is whether the country will buy this line and, more broadly, whether it will follow the New York model. Should it do so, those future historians will no doubt look at the election of 2012 as the contest in which the middle class staggered past the point of no return.

Original Source: http://www.theaustralian.com.au/news/world/the-american-middle-class-undermined-underpaid-and-underemployed/story-e6frg6ux-1226179899621

 

 
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